(Source: Markit Indices Limited)

Duration The Fund was established on 12 July 2005 and shall exist for as long as it appears to the Manager and the Trustee that it is in the interests of the unitholders for it to continue. In some circumstances, the unitholders* can resolve at a meeting to terminate the Fund.

Performance Markit iBoxx® ABF Malaysia Bond Index

Benchmark

Income Income distribution (if any) will be paid semi-annually.

DistributionPolicy

Breakdown For the financial period under review, the size of the Fund stood at 1,265,421,800of Unit units.Holdings bySize (Forward)

8 Size of holding As at 30 June 2018 As at 31 March 2018 No of Number of No of Number of units held unitholders units held unitholders Less than 100 300 6 300 6 100 – 1,000 16,000 31 12,800 26 1,001 -10,000 30,300 7 39,300 9 10,001 – 100,000 103,800 5 86,100 4 100,001 to less than 5% of issue units 53,363,530 5 53,375,430 5 5% and above of issue units 1,211,907,870 1 1,211,907,870 1

Fund Performance Data

Portfolio Details of portfolio composition of the Fund for the financial periods as at 30 June 2018,Composition 31 March 2018 and three financial years as at 31 December are as follows:

* Above price and net asset value per unit are shown as ex-distribution.

Note:(1) Total return is the actual/annualised return of the Fund for the respective financial periods/years computed based on the net asset value per unit and net of all fees.(2) Distribution yield is calculated based on the total distribution for the respective financial years divided by the closing quoted price.(3) Management expense ratio (“MER”) is calculated based on the total fees and expenses incurred by the Fund divided by the average fund size calculated on a daily basis.(4) Portfolio turnover ratio (“PTR”) is calculated based on the average of the total acquisitions and total disposals of investment securities of the Fund divided by the average fund size calculated on a daily basis. The PTR decreased by 0.01 times (25.0%) as compared to 0.04 times for the financial period ended 31 March 2018 mainly due to decrease in investing activities.

10 Average Total Return (as at 30 June 2018)

ABFMY1(a) iBoxx Index(b)

% % One year 2.82 2.92 Three years 3.31 3.56 Five years 3.26 3.48 Ten years 3.90 4.19

Annual Total Return

Financial Years Ended ABFMY1(a) iBoxx Index(b)

(a) Source: Novagni Analytics and Advisory Sdn Bhd.

(b) Markit iBoxx ABF Malaysia Bond Index (“iBoxx Index”).

The Fund performance is calculated based on the net asset value per unit of the Fund. Average total return of the Fund and its benchmark for a period is computed based on the absolute return for that period annualised over one year.

Note: Past performance is not necessarily indicative of future performance and that unit prices and investment returns may go down, as well as up.

Fund For the financial period under review, the Fund registered a negative return of 0.14%Performance which was entirely capital in nature.

Thus, the Fund’s negative return of 0.14% has underperformed the benchmark’s negative return of 0.13% by 0.01%.

As compared with the financial period ended 31 March 2018, the net asset value (“NAV”) per unit of the Fund decreased by 0.14% from RM1.1593 to RM1.1577, while units in circulation remain unchanged at 1,265,421,800 units.

The closing price quoted at Bursa Malaysia of the Fund increased by 0.09% from RM1.1530 to RM1.1540.

The line chart below shows the comparison between the annual performance of ABFMY1 and its benchmark, iBoxx® Index, for the financial years ended 31 December.

(Forward)

11 Note: Past performance is not necessarily indicative of future performance and that unit prices and investment returns may go down, as well as up.

Strategies For the financial period under review, the Fund used a passive strategy whereby theand Policies Manager aims, by way of representative sampling, to achieve a return on the FundEmployed Assets that closely tracks the returns of the benchmark index.

Portfolio This table below is the asset allocation of the Fund for the financial periods underStructure review.

There has been no significant change to the asset allocation since the last reporting period.

Cross There are no cross trades for the Fund during this financial period under review.Trades

Distribution/ There was no income distribution and unit split declared for the financial period underunit splits review.

State of There has been neither significant change to the state of affairs of the Fund nor anyAffairs of circumstances that materially affect any interests of the unitholders during the financialthe Fund period under review.

12 Note: The Manager has appointed Deutsche Trustees Malaysia Berhad (“DTMB”) to carry out the fund accounting and valuation services for all funds effective 20th June 2018.

Rebates It is our policy to pay all rebates to the Fund. Soft commission received fromand Soft brokers/dealers are retained by the Manager only if the goods and services provided areCommission of demonstrable benefit to unitholders of the Fund.

During the financial period under review, the Manager had received on behalf of the Fund, soft commissions in the form of fundamental database, financial wire services, technical analysis software and stock quotation system incidental to investment management of the Fund. These soft commissions received by the Manager are deem to be beneficial to the unitholders of the Fund.

Market Malaysia registered forex reserves of USD107.8b as at 30 Mar 2018, an increase fromReview end-February’s level and the highest level in three years. Again, Malaysia’s external reserves surged USD2.2b in the first two weeks of April to USD110b on the back of export earnings repatriation and corporate inflows, most likely from O&G sector following Saudi Aramco’s investment in RAPID. External reserves now cover 7.7x of imports and 1.1x of short-term external debt.

The downtrend for the headline inflation rate continued in March, as it eased to 1.3% Year-on-Year (YoY) – the lowest in 17 months. This was mainly due to a further decline in transportation and communication as well as F&B costs As UST yields broke 3.00 for the 10y, MGS market suffered significantly as local traders/investors trimmed their positions. Some of them were forced to sell when the prices triggered their cut-loss level. The short tenors (3y and below) suffered the most while ultra-long tenors 20y and 30y were holding up.

On the other hand, foreigners were seen selling the short tenors and buying the long tenors to extend duration. In March, foreigners net bought RM2.9b of domestic bonds, recouping most of the RM3.9b outflows in Feb.

In the primary market, there were 3 government bond auctions as follows:

• RM2.5b 20-year reopening of the GII 08/47 which garnered a BTC ratio of 2.12x at average yield of 4.804%. • RM4.0b 5-year new issuance of MGS 04/23 which drew a BTC ratio of 3.33x at average yield of 3.757%. • RM 4.0b 10.5-year new issuance of the GII 10/28 which closed with a BTC ratio of 2.70x at an average yield of 4.369%.

Most investors were mostly on the sidelines pending for the GE14 results on 9 May. The surprise win by Pakatan Harapan in the election saw some knee-jerk reactions in the govvies market with the 10y MGS given 10 bps higher at 4.25%. However, these knee-jerk reactions did not last long as the strong support from the local institutional/pension funds brought the govvies levels almost unchanged as the prior election results.

Towards the later part of the month of May as the UST continued to sell off with 10y UST touching all-time high of 3.12% on higher inflationary pressures, local govvies market saw yields rising again. The bearish sentiment in the govvies market intensified as MYR continued to weaken on heavy foreign selling both in the domestic bond and equity market. 13 In the primary market, there were 3 government bond auctions as follows:

• RM3.0b 15-year new issuance of MGS 11/33 which drew a BTC ratio of 2.722x at average yield of 4.642%. • RM3.0b 7-year new issuance of GII 08/25 which garnered a BTC ratio of 3.397x at average yield of 4.202%. • RM 3.5b 10.5-year new issuance of MGS 6/28 which closed with a BTC ratio of 1.851x at an average yield of 4.202%. • RM 4.0b 5-year new issuance of GII 11/23 which closed with a BTC ratio of 1.989x at an average yield of 4.094%.

The above auctions show that there were substantial onshore demands immediately post the general election results, as shown in the strongest BTC result for the year for 7y GII 8/25. However, toward the end of the month, as the UST yields rose, the demand became lackluster.

The month of May 2016 saw foreigners reduce their holdings of Malaysian government debt securities from MYR205.4b to MYR192.5b. The fall in foreign holdings was driven by the global sell down in emerging markets and may have been further exacerbated by domestic developments following GE14.

In the primary market, there were 2 government bond auctions as follows:

• MYR2.5b 20-year new issuance of MGS 6/38 which drew a BTC ratio of 1.94x at average yield of 4.893%.

• MYR3.5b 15-year reopening of GII 6/33 which garnered a BTC ratio of 2.783x at average yield of 4.778%.

Despite the significant reversal in foreign holdings, local MGS yields were anchored by strong local investor support and the fall in UST yields from their highs in May 2018. Trading volume for government securities fell sharply from MYR62.0b in May 2018 to MYR38.0b.

Increasing concern over the likelihood of global trade war has started weigh on growth expectations, which should provide support for global bond yields. The decline in the UST 10Y yield from its recent high of 3.11% to 2.86% has resulted in the UST 10Y vs MGS 10Y spread widening to 135 bps, which is line with historical average spread. There will be sizeable local govvie maturities between August and October 2018 which could cause volatility if foreign investors choose to not roll over their holdings although mitigated by the holding structure as current foreign holdings are mostly real money investors and passive benchmark funds.

Market We expect Bank Negara Malaysia (“BNM”) to maintain the Overnight Policy RateOutlook (“OPR”) at 3.25% for the rest of the year. The domestic economy continued to expand at a healthy rate of 5.4% Year-On-Year (YoY) in 1Q2018 but there are downside risks to growth from here on with the potential escalation of a global trade war. Inflation continues to be benign and the removal of the GST will help suppress inflationary pressure.

Global bond yields will be driven by two increasingly divergent factors, the hawkish monetary policy in the U.S. and increasing concerns over the long term growth outlook of the global economy. These developments have resulted in a significant flattening of the UST yield curve. As at end June 2018, the 2Y vs 10Y spread has stood at 32bps 14 which is the lowest in over a decade.

The weakening of MYR against the USD may also weigh on the market due to fears of more foreign outflows. Nevertheless, unless there are more surprises from both domestic and external events, we expect the bond market to be well supported by local institutions and pension funds as current yields remain attractive to long term investors.

Kuala Lumpur, Malaysia

AmFunds Management Berhad

7 August 2018

15ADDITIONAL INFORMATION

Board of Directors of the Manager

The Board of Directors, of which more than one-third are independent members,exercise ultimate control over the operations of the Manager. For the financial periodfrom 1 April 2018 to 30 June 2018, there were three (3) Board of Directors’ meetings held by theManager.

Details of the Directors of the Manager as at 30 June 2018 are set out as below:

ix) (Oct 2011 – Feb 2017)

x) (Feb 2017 – Present)

AmFunds Management Berhad [Chief Executive Officer]Occupation : Chief Executive Officer, AmFunds Management BerhadDate of appointment : 7 March 2017Directorship of other public : Not applicablecompaniesNumber of Board meeting : Three (3) out of three (3) Board Meetingsattended for the financialperiod from 1 April 2018 to 30June 2018Member of any other Board : Not applicableCommitteeDate of appointment to the : Not applicableInvestment CommitteeNumber of Investment : Not applicableCommittee meeting attendedfor the financial period from 1April 2018 to 30 June 2018Family relationship with any : NonedirectorConflict of interest with the : NoneFundList of convictions for offences : Nonewithin the past 10 years (if any)

iii) (March 1990-August 1992)

iv) (September 1992-December 2001)

v) (January 2002-December 2005)

AmSecurities Sdn Bhd [Managing Director]

vi) (January 2006-May 2009) (Retirement)

AmInvestment Bank Berhad Group [Economic Advisor]

vii) (September 2009-August 2012) (Contract)

Permodalan Nasional Berhad [Senior Vice President/Head, Research Division]Occupation : DirectorDate of appointment : 3 March 2014Directorship of other public : KUISAS BerhadcompaniesNumber of Board meeting : Three (3) out of three (3) Board Meetingsattended for the financialperiod from 1 April 2018 to 30June 2018Member of any other Board : i) Audit and Examination Committee (formerly known asCommittee Audit Committee of Directors) ii) Investment Committee (Independent member)Date of appointment to the : 3 March 2014Investment Committee

Number of Investment : One (1) out of one (1) Investment Committee MeetingCommittee meeting attendedfor the financial period from 1April 2018 to 30 June 2018Family relationship with any : NonedirectorConflict of interest with the : NoneFundList of convictions for offences : Nonewithin the past 10 years (if any)

ix) (January 1991 – June 1992)

19Number of Board meeting : Three (3) out of three (3) Board Meetingsattended for the financialperiod from 1 April 2018 to 30June 2018Member of any other Board : i) Investment Committee; andCommittee ii) Audit and Examination Committee (formerly known as Audit Committee of Directors)Date of appointment to the : 15 December 2014Investment CommitteeNumber of Investment : One (1) out of one (1) Investment Committee MeetingCommittee meeting attendedfor the financial period from 1April 2018 to 30 June 2018Family relationship with any : NonedirectorConflict of interest with the : NoneFundList of convictions for offences : Nonewithin the past 10 years (if any)

iv) (May 2013-July 2014)

v) (May 2015-Present) Credit Guarantee Corporation Malaysia Berhad [Advisor, Investment (Contract)] 20Occupation : Advisor, Investment of Credit Guarantee Corporation Malaysia BerhadDate of appointment : 18 January 2016Directorship of other public : Pacific & Orient Insurance Co. BerhadcompaniesNumber of Board meeting : Two (2) out of three (3) Board Meetingsattended for the financialperiod from 1 April 2018 to 30June 2018Member of any other Board : i) Investment Committee; andCommittee ii) Audit and Examination Committee (formerly known as Audit Committee of Directors)Date of appointment to the : 18 January 2016Investment CommitteeNumber of Investment : One (1) out of one (1) Investment Committee MeetingCommittee meetings attendedfor the financial period from 1April 2018 to 30 June 2018Family relationship with any : NonedirectorConflict of interest with the : NoneFundList of convictions for offences : Nonewithin the past 10 years (if any)

xi) (April 2010-June 2016)

xii) (July 2016-May 2017)

xiii) (June 2017-Present)

AmFunds Management Berhad [Acting Chief Executive Officer]

Occupation : Acting Chief Executive Officer, AmFunds Management

BerhadDate of appointment : 1 June 2017Directorship of other public : NonecompaniesNumber of Board meeting : Three (3) out of three (3) Board Meetingsattended for the financial periodfrom 1 April 2018 to 30 June2018Member of any other Board : Investment Committee (Non- Independent member)CommitteeDate of appointment to the : 31 October 2017Investment Committee

22Number of Investment : One (1) out of one (1) Investment Committee MeetingCommittee meeting attended forthe financial period from 1 April2018 to 30 June 2018Family relationship with any : NonedirectorConflict of interest with the : NoneFundList of convictions for offences : Nonewithin the past 10 years (if any)

Investment Committee

The Investment Committee, of which more than one-third are independent members, exercise ultimateselect appropriate strategies and efficiently implemented to achieve the proper performance, activelymonitor, measure and evaluate the fund management performance of the Manager. For the financialperiod from 1 April 2018 to 30 June 2018, there was one (1) Investment Committee Meeting held bythe Manager.

23Number of Investment : One (1) out of one (1) Investment Committee MeetingCommittee meeting attendedfor the financial period from 1April 2018 to 30 June 2018Family relationship with any : NonedirectorConflict of interest with the : NoneFundList of convictions for offences : Nonewithin the past 10 years (if any)

Material Litigation

For the financial year under review, neither the Directors of the management company nor theManager of the Fund were engaged in any material litigation and arbitration, including those pendingor threatened, and any facts likely to give any proceedings, which might materially affect thebusiness/financial position of the Manager and of its delegates. The Fund has also not engaged in anymaterial litigation and arbitration, including those pending or threatened, and any facts likely to giveany proceedings, which might materially affect the Fund.

Manager

Previously, we have appointed AmInvestment Management Sdn Bhd (“AIM”) to implement theFund’s investment strategy on behalf of us to achieve the objectives of the Fund. However, followingthe consolidation of business activities of AmFunds Management Berhad (formerly known asAmInvestment Services Berhad) (“AFM”) and AIM on 1 December 2014, AFM has acquired/assumethe obligations, undertaking, commitments and contingencies of AIM. Effective 1 December 2014,AFM is a licensed fund manager approved by the Securities Commission Malaysia and manages theFund.

Investment Committee

The Investment Committee reviews the Fund’s investment objective and guidelines; and to ensure thatthe Fund is invested appropriately. For the financial period from 1 April 2018 to 30 June 2018, therewas one (1) Investment Committee Meeting held by the Manager.

CASH AND CASH EQUIVALENTS AT END OF

Cash and cash equivalents comprise:

The accompanying notes form an integral part of the financial statements.

29ABF Malaysia Bond Index Fund

NOTES TO THE FINANCIAL STATEMENTS

1. GENERAL INFORMATION

ABF Malaysia Bond Index Fund (“the Fund”) was established pursuant to a Deed dated 12 July 2005 as amended by Deeds Supplemental thereto (“the Deed”), between AmFunds Management Berhad as the Manager, HSBC (Malaysia) Trustee Berhad as the Trustee and all unitholders.

The Fund was set up with the objective for investors who seek an “index-based” approach to investing in a portfolio of Ringgit Malaysia denominated Government and quasi-Government debt securities. As provided in the Deeds, the “accrual period” or financial year shall end on 31 December and the units in the Fund were first offered for sale on 13 July 2005.

2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The financial statements of the Fund have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRS”) as issued by the Malaysian Accounting Standards Board (“MASB”) and are in compliance with International Financial Reporting Standards.

The financial statements of the Fund have been prepared under the historical cost convention, unless otherwise stated in the accounting policies.

Standards effective during the financial period

The adoption of MFRS which have been effective during the financial period did not have any material financial impact to the financial statements.

MFRS 9 Financial Instruments

MFRS 9 reflects International Accounting Standards Board‟s (“IASB”) work on the replacement of MFRS 139 Financial Instruments: Recognition and Measurement (“MFRS 139”). MFRS 9 effective for financial year beginning on or after 1 January 2018. Based on the Fund's preliminary assesment, there is a minimal impact on the classification and measurement of the Fund's investment as the investment will continue to be measured at FVTPL. Further, there is no impact on the classification and measurement of the fund's financial liabilities.

3. SIGNIFICANT ACCOUNTING POLICIES

Income recognition

Income is recognised to the extent that it is probable that the economic benefits will flow to the Fund and the income can be reliably measured. Income is measured at the fair value of consideration received or receivable.

30Interest income on fixed income securities and short-term deposits are recognised on an accrualbasis using the effective interest method, which includes the accretion of discounts and amortisationof premiums.

Income tax

Current tax assets and liabilities are measured at the amount expected to be recovered from or paidto the tax authorities. The tax rates and tax laws used to compute the amount are those that areenacted or substantively enacted at the reporting date.

Current taxes are recognised in profit or loss except to the extent that the tax relates to itemsrecognised outside profit or loss, either in other comprehensive income or directly in equity.

Functional and presentation currency

Functional currency is the currency of the primary economic environment in which the Fundoperates that most faithfully represents the economic effects of the underlying transactions. Thefunctional currency of the Fund is Ringgit Malaysia which reflects the currency in which the Fundcompetes for funds, issues and redeems units. The Fund has also adopted Ringgit Malaysia as itspresentation currency.

Statement of cash flows

The Fund adopts the direct method in the preparation of the statement of cash flows.

Cash equivalents are short-term, highly liquid investments that are readily convertible to cash withinsignificant risk of changes in value.

Distribution

Distributions are at the discretion of the Fund. A distribution to the Fund‟s unitholders is accountedfor as a deduction from realised reserves. A proposed distribution is recognised as a liability in theperiod in which it is approved.

Unitholders’ capital

The unitholders‟ capital of the Fund meets the definition of puttable instruments and is classified asequity instruments under MFRS 132 Financial Instruments: Presentation (“MFRS 132”).

Financial assets

Financial assets are recognised in the statement of financial position when, and only when, the Fundbecomes a party to the contractual provisions of the financial instrument.

When financial assets are recognised initially, they are measured at fair value, plus, in the case offinancial assets not at fair value through profit or loss, directly attributable transaction costs.

The Fund determines the classification of its financial assets at initial recognition, and the categoriesapplicable to the Fund include financial assets at fair value through profit or loss (“FVTPL”) andloans and receivables.

31(i) Financial assets at FVTPL

Financial assets are classified as financial assets at FVTPL if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading by the Fund include fixed income securities acquired principally for the purpose of selling in the near term.

Subsequent to initial recognition, financial assets at FVTPL are measured at fair value. Changes in the fair value of those financial instruments are recorded in „Net gain or loss on financial assets at fair value through profit or loss‟. Interest earned element of such instrument is recorded separately in „Interest income‟.

Investments are stated at fair value on a portfolio basis in accordance with the provisions of the Deed, fair value is determined based on prices provided by the index provider, Markit Indices Limited, plus accrued interest. Adjusted cost of investments relates to the purchase cost plus accrued interest, adjusted for amortisation of premium and accretion of discount, if any, calculated over the period from the date of acquisition to the date of maturity of the respective securities as approved by the Manager and the Trustee. Unrealised gain or loss recognised in profit or loss is not distributable in nature.

On disposal of investments, the net realised gain or loss on disposal is measured as the difference between the net disposal proceeds and the carrying amount of the investments. The net realised gain or loss is recognised in profit or loss.

(ii) Loans and receivables

Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables.

Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process.

Impairment of financial assets

The Fund assesses at each reporting date whether there is any objective evidence that a financialasset is impaired.

(i) Loans and receivables carried at amortised cost

To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Fund considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

If any such evidence exists, the amount of impairment loss is measured as the difference between the asset‟s carrying amount and the present value of estimated future cash flows discounted at the financial asset‟s original effective interest rate. The impairment loss is recognised in profit or loss.

32 The carrying amount of the financial asset is reduced through the use of an allowance account. When loans and receivables become uncollectible, they are written off against the allowance account.

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss.

Financial liabilities

Financial liabilities are classified according to the substance of the contractual arrangements enteredinto and the definitions of a financial liability.

Financial liabilities, within the scope of MFRS 139, are recognised in the statement of financialposition when, and only when, the Fund becomes a party to the contractual provisions of thefinancial instrument.

A financial liability is derecognised when the obligation under the liability is extinguished. Gainsand losses are recognised in profit or loss when the liabilities are derecognised, and through theamortisation process.

Classification of realised and unrealised gains and losses

Unrealised gains and losses comprise changes in the fair value of financial instruments for theperiod and from reversal of prior period‟s unrealised gains and losses for financial instrumentswhich were realised (i.e. sold, redeemed or matured) during the reporting period.

Realised gains and losses on disposals of financial instruments classified at fair value through profitor loss are calculated using the weighted average method. They represent the difference between aninstrument‟s initial carrying amount and disposal amount.

Significant accounting estimates and judgments

The preparation of the Fund‟s financial statements requires the Manager to make judgments,estimates and assumptions that affect the reported amounts of revenues, expenses, assets andliabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertaintyabout these assumptions and estimates could result in outcomes that could require a materialadjustment to the carrying amount of the asset or liability in the future.

The Fund classifies its investments as financial assets at FVTPL as the Fund may sell itsinvestments in the short-term for profit-taking or to meet unitholders‟ cancellation of units.

33 No major judgments have been made by the Manager in applying the Fund‟s accounting policies. There are no key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period.

The Fund‟s MER is as follows:

Manager‟s fee 0.10 0.10

Total MER 0.17 0.17

The MER of the Fund is the ratio of the sum of annualised fees and expenses incurred by the Fund to the average net asset value of the Fund calculated on a daily basis.

16. PORTFOLIO TURNOVER RATIO (“PTR”)

The PTR of the Fund, which is the ratio of average total acquisitions and disposals of investments to the average net asset value of the Fund calculated on a daily basis, is 0.03 times (2017: 0.08 times).

4317. SEGMENTAL REPORTING

In accordance with the objective of the Fund, substantially all of the Fund‟s investments are made in the form of fixed income instruments in Malaysia. The Manager is of the opinion that the risk and rewards from these investments are not individually or segmentally distinct and hence the Fund does not have a separately identifiable business or geographical segments.

18. TRANSACTIONS WITH FINANCIAL INSTITUTIONS

Details of transactions with financial institutions for the financial period ended 30 June 2018 are as follows:

Financial institutions Transaction value

Public Bank Berhad 501,401,000 83.37

Total 601,387,000 100.00

There was no transaction with financial institutions related to the Manager, during the financial period.

The above transactions were in respect of fixed income instruments and money market deposits. Transactions in these investments do not invlove any commission or brokerage.

19. FINANCIAL INSTRUMENTS

(a) Classification of financial instruments

The significant accounting policies in Note 3 describe how the classes of financial instruments are measured, and how income and expenses, including fair value gains and losses, are recognised. The following table analyses the financial assets and liabilities of the Fund in the statement of financial position by the class of financial instrument to which they are assigned, and therefore by the measurement basis.

Level 1 Level 2 Level 3 Total

(c) Financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value

The following are classes of financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value due to their short period to maturity or short credit period:

 Deposits with financial institutions

 Cash at banks  Amount due to Manager  Amount due to Trustee  Amount due to index provider  Sundry payables and accrued expenses

There are no financial instruments which are not carried at fair values and whose carrying amounts are not reasonable approximation of their respective fair values.

20. RISK MANAGEMENT POLICIES

The Fund is exposed to a variety of risks that include market risk, credit risk, liquidity risk, single issuer risk, regulatory risk, management risk and non-compliance risk.

Risk management is carried out by closely monitoring, measuring and mitigating the above said risks, careful selection of investments coupled with stringent compliance to investment restrictions as stipulated by the Capital Market and Services Act 2007, Securities Commission‟s Guidelines on Exchange Traded Funds and the Deed as the backbone of risk management of the Fund.

Market risk

Market risk, in general, is the risk that the value of a portfolio would decrease due to changes in market risk

46(i) Interest rate risk

Interest rate risk will affect the value of the Fund‟s investments, given the interest rate movements, which are influenced by regional and local economic developments as well as political developments.

Domestic interest rates on deposits and placements with licensed financial institutions are determined based on prevailing market rates.

The result below summarised the interest rates sensitivity of the Fund‟s NAV, or theoretical value (applicable to Islamic money market deposit) due to the parallel movement assumption of the yield curve by +100bps and -100bps respectively:

Parallel shift in Sensitivity of the Fund’s NAV, or theoretical value

yield curve by: 2018 2017 RM RM

+100 bps (80,982,276) (81,078,627)

-100 bps 89,702,701 89,456,179

Credit risk

Credit risk is the risk that the counterparty to a financial instrument will cause a financial loss to the Fund byfailing to discharge an obligation. The Fund invests in fixed income instruments. As such the Fund would beexposed to the risk of bond issuers and financial institutions defaulting on its repayment obligations whichin turn would affect the net asset value of the Fund.

(i) Credit quality of financial assets

The following table analyses the Fund‟s portfolio of debt securities by rating category as at 30 June 2018 and 30 June 2017: As a % of As a % of debt net asset Credit rating RM securities value

2018 NR* 1,462,348,565 100.00 99.82

2017 NR* 1,484,010,618 100.00 99.81

* Non-rated

For deposits with financial institutions, the Fund only makes placements with financial institutions with sound rating. The following table presents the Fund‟s portfolio of deposits by rating category as at 30 June 2018 and 30 June 2017: As a % of As a % of net asset Credit rating RM deposits value

2018 P1/MARC-1 3,100,293 100.00 0.21

47 As a % of As a % of net asset RM deposits value

2017 P1/MARC-1 3,194,583 100.00 0.21

Cash at banks are held for liquidity purposes and are not exposed to significant credit risk.

(ii) Credit risk concentration

Concentration of risk is monitored and managed based on sectorial distribution. The table below analyses the Fund‟s portfolio of debt securities by sectorial distribution as at 30 June 2018 and 30 June 2017:

1,462,348,565 100.00 99.82

1,484,010,618 100.00 99.81

There is no geographical risk as the Fund invests only in investments in Malaysia.

Liquidity risk

Liquidity risk is defined as the risk of being unable to raise funds or borrowing to meet payment obligationsas they fall due. The Fund maintains sufficient level of liquid assets, after consultation with the Trustee, tomeet anticipated payments and cancellations of units by unitholders. Liquid assets comprise of deposits withlicensed financial institutions and other instruments, which are capable of being converted into cash within 5to 7 days. The Fund‟s policy is to always maintain a prudent level of liquid assets so as to reduce liquidityrisk.

Objectives and assumptions

For each security in the Fund, the cash flows are projected according to its asset class. Each asset class, if any, follows the calculation method as below:

(i) For bonds

(a) For zero-coupon bonds, the nominal amount will be returned at maturity date. (b) For non-zero coupon bonds, the coupons could be paid on annual, bi-annual or quarterly basis.

Any changes in national policies and regulations may have effects on the capital market and the net asset value of the Fund.

Management risk

Poor management of the Fund may cause considerable losses to the Fund that in turn may affect the net asset value of the Fund.

Non-compliance risk

This is the risk of the Manager, the Trustee or the Fund not complying with internal policies, the Deed of the Fund, securities law or guidelines issued by the regulators. Non-compliance risk may adversely affect the investments of the Fund when the Fund is forced to rectify the non-compliance.

21. CAPITAL MANAGEMENT

The primary objective of the Fund‟s capital management is to ensure that it maximises unitholders‟ value by expanding its fund size to benefit from economies of scale and achieving growth in net asset value from the performance of its investments.

The Fund manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Fund may issue new or bonus units, make distribution payment, or return capital to unitholders by way of redemption of units.

No changes were made in the objective, policies or processes during the financial periods ended 30 June 2018 and 30 June 2017.